Refund a paid sales invoice

How to record a refund for a customer for an invoice that has been paid.

Use when you have returned money to the customer.

How this works

Your customer account will show details of the invoice and the customer receipt. This will

  • Update the balance of your bank account to show money leaving your account.

  • Reverse the payment and show the invoice as outstanding

  • Update the balance on your customer account to show that you given them a refund.

  • If you use the VAT Cash Accounting scheme, the refund is reported on your next VAT return as a correction.

To make sure your customer's account is updated correctly, you may also need to create a credit note. Creating a credit note will

  • Update the balance of customer's account.

  • Match the credit note to the invoice, so the invoice shows as paid.

You have sold goods to your customer for £100. your customer has paid you £100, so the outstanding balance is now zero.

You customer has returned the goods as they were faulty and you have sent them a £100 refund.

The balance on your customer account now shows £100 in credit. To clear this balance you also need to enter a credit note.

Record a refund

  1. From Sales tab, open relevant sales invoice from the list.

  2. Under Amount Paid, select the payment link.

  3. Select the edit button , next to the receipt you want to refund.

  4. Enter the refund date, and the bank account you want the refund to be paid from.

    The refund amount will always match the amount of the receipt. You cannot partially refund a receipt.

    If required, you can also enter a brief description in the Reference (optional) box.

  5. Click Save.

Record a credit note

When you record a credit note, this will

  • Update the balance on your customer account to clear the balance left by the refund.

  • If you use the VAT Cash Accounting scheme, the credit note is reported on your next VAT return.

  1. From Sales tab, open relevant sales invoice from the list.

  2. Under Amount Paid, select the Add Credit Note link.

  3. The credit note will automatically match the sales invoice.

  4. Click Save.

Customer activity

Your customer activity shows the following transactions. The total value of these transactions is zero.

For example

  • A sales invoice for £120.

  • A sales receipts, for -£120.

  • A refund for £120

  • A credit note for -£120.

  • A customer allocation. This is a transaction we create we match payments and invoices.

The VAT return

If you are on the VAT Cash Accounting scheme, the refund is reported on your VAT return as a correction, cancelling the value of the receipt.